Quicken 2017: Investment, Reinvest, Cash Balance, etc.

Unknown

I wish to use Quicken 2017 primarily for recording stocks. My stocks are subscribed to the Dividend Reinvestment Plan, as such I receive a cash dividend payment that is automatically and immediately used to purchase more stock. If I have cash left over, which inevitably I do, the cash is held until next the dividend payment.

Since I am new to Quicken, I wish to start by setting it up correctly as I believe doing so will reward me later on down the line. How exactly do I correctly record this in Quicken? If I attempt to include the cash balance, that works, but then the reinvestment does not deduct from the cash balance... or I am able to make the reinvestment purchase deduct correctly but then the cash balance is not recorded.

Should I include the dividend payment and then just select the ordinary share purchase? Do I somehow need to create another account just to hold the cash values (if so how)? Please advise me the correct way to handle such transactions.

Thanks

NotACPA

My guess is that your stock holdings might be held at the issuing company, rather than at a brokerage ... but that doesn't matter.

To record a stock (or any other investment) holding in Q, you need to create an investment account and you need to add the particular stocks to Q's Security List (CTRL-Y).  When creating an account that's at the issuing company, just set it up as a manual account.  If they really are at a brokerage, then you can probably (at your option) set the account to download from the brokerage.

If the stocks are held at several issuing companies, you can still record them in Q as being in a single account.

Then, show the initial purchase transaction in the account and any ReinvDiv transactions. "Invest - Income Reinvested" is one of the standard "actions" in an investment account.

If you don't require the degree of accuracy that a "Buy" would bring, you can just do a "Shs Added" transaction to get that initial position. 

Also, a ReinvDiv transaction isn't supposed to impact the accounts cash balance ... because the Div received is immediately consumed by the Reinv (aka, buy) side of the transaction.  Existing cash in the account isn't touched by this.

q_lurker

It sounds to me as if your reinvestment plan might only purchase whole shares (or some similar limitation).  So if you get a $45 dividend and the stock is selling at $20/share, your reinvestment buys 2 shares and leaves you with $5 to carry over as cash to the next cycle.  

If that is the right picture, you best pattern (IMO) would be to treat these as separate dividends and purchases.  The Quicken Reinvest Dividend action always reinvests the entire dividend which does not seem to be your case.  There are some subtle distinctions between the one-piece Reinvestment approach and the two-piece Div and Buy approach, but you need not get bothered by those differences.  The basic end result is the same.  

HTH

Unknown

Thank you for the responses. You are correct q.lurker, I receive the dividend as 'cash', for example $45, then stock is purchased at $20/share minus commission. The remaining amount is then held and added on to the next dividend payment months later. This is primarily why I find it useful to track the cash balance as well.

NotACPA, It is odd to me that ReInvDiv does not subtract from the cash balance, but seemingly it is me that is not used to the normal.

The regular dividend payment approach would increment the cash balance, followed by a regular Buy... that looks like it should work. Any downsides? Are there any foreseeable problems later down the line when I may wish to create reports, or file tax returns? I hope you understand.

Thanks,

NotACPA

Andy said:

Thank you for the responses. You are correct q.lurker, I receive the dividend as 'cash', for example $45, then stock is purchased at $20/share minus commission. The remaining amount is then held and added on to the next dividend payment months later. This is primarily why I find it useful to track the cash balance as well.

NotACPA, It is odd to me that ReInvDiv does not subtract from the cash balance, but seemingly it is me that is not used to the normal.

The regular dividend payment approach would increment the cash balance, followed by a regular Buy... that looks like it should work. Any downsides? Are there any foreseeable problems later down the line when I may wish to create reports, or file tax returns? I hope you understand.

Thanks,

A ReinvDiv is a Div and Buy combined into a single transaction.  The 2 events net to $0 (Div increases cash by $x, and Buy decreases cash by same amount), which is why there's no impact upon the cash balance.  In your tax reports, however, Q knows that you've actually received the money ... and if this takes place in a taxable account, Q will report it properly.  In all accounts, Q will report the income for performance tracking.

But, in your situation, you don't want the ReinvDiv ... because you aren't reinvesting the entire Div.  You need the 2 separate transactions.

q_lurker

Andy said:

Thank you for the responses. You are correct q.lurker, I receive the dividend as 'cash', for example $45, then stock is purchased at $20/share minus commission. The remaining amount is then held and added on to the next dividend payment months later. This is primarily why I find it useful to track the cash balance as well.

NotACPA, It is odd to me that ReInvDiv does not subtract from the cash balance, but seemingly it is me that is not used to the normal.

The regular dividend payment approach would increment the cash balance, followed by a regular Buy... that looks like it should work. Any downsides? Are there any foreseeable problems later down the line when I may wish to create reports, or file tax returns? I hope you understand.

Thanks,

First understand that the ReinvDiv action is a combination of two transactions into one.  The Div part is recognized for such things as tax data but does not put the dollars in as cash.  The shares that are acquired through that action are treated as having been bought on that date for future cap gains but no cash is tapped from the account, since no cash was put into the account from the Div.  That is why a ReinvDiv does not subtract from the cash amount.  If you enter both a Div and a ReinvDiv for the same real world transaction, you will be doubling up the amount of Dividends showing for tax reports.   

No downsides to the Div and Buy pairing.  

That said, Quicken can calculate values of Amount Invested and Amount Reinvested.  The Amount Invested does NOT include acquisition of shares through ReinvDiv transactions.  That amount is totaled in the Amount Reinvested value,  The premise is toward those investors who buy and hold (and reinvest).  Those folks like to see that they bought 100 shares for $10 ($1000)and now through reinvestments have 120 shares worth $12/share ($1440).  Amount INvested remains at the original $1000.  Those users (too often IMO) want to ignore that they paid some other value for those extra 20 shares.  (I invested $1000 and it is now worth $1440.  Isn't that great!!!)  Going the Div and Buy route, the Amount Invested will increase with your repeated decision to take the Div dollars and buy more shares.  Amount Reinvested will stay at $0.  

The Amount Invested parameter is used for ROI calculations (Return / Amount Invested).  As such two users who take two different approaches (one ReinvDiv and the other Div & Buy) will get two different ROI results.  There are other ramifications to the Amount Invested parameter, but that is one reason I prefer the Average Annual Return for performance assessments.  For any performance calculation out of Quicken, you should familiarize yourself with the calculation before drawing conclusions.   

But for transaction reports, cap gains determination, tax data, etc., there are no drawbacks to the Div&Buy process.         

Unknown

Andy said:

Thank you for the responses. You are correct q.lurker, I receive the dividend as 'cash', for example $45, then stock is purchased at $20/share minus commission. The remaining amount is then held and added on to the next dividend payment months later. This is primarily why I find it useful to track the cash balance as well.

NotACPA, It is odd to me that ReInvDiv does not subtract from the cash balance, but seemingly it is me that is not used to the normal.

The regular dividend payment approach would increment the cash balance, followed by a regular Buy... that looks like it should work. Any downsides? Are there any foreseeable problems later down the line when I may wish to create reports, or file tax returns? I hope you understand.

Thanks,

Thank you greatly for the help.

I did a little research and found the company that processes my stock dealings are indeed not a broker, but a registrar. I'm not sure of the exact implications but it does go some way to explaining some of the differences I am facing.

In theory, I would like to be able to differentiate between Amount Invested and Amount Reinvested, not so much to tweak the figures, so to speak, but being able to examine the two separately when required. That said, I am beginning to wonder that if I am not dealing with a broker, but a registrar, and the registrar is obviously holding the cash balance and also purchasing the shares on my behalf, that the Amount Reinvested (ReInvDiv) would actually be technically incorrect anyway and that Amount Invested (Div & Buy) approach is more correct... but this is fast becoming more of a financial query, not a Quicken one.

Any final thoughts? Input is appreciated. Thank you again.

Tom Young

Andy said:

Thank you for the responses. You are correct q.lurker, I receive the dividend as 'cash', for example $45, then stock is purchased at $20/share minus commission. The remaining amount is then held and added on to the next dividend payment months later. This is primarily why I find it useful to track the cash balance as well.

NotACPA, It is odd to me that ReInvDiv does not subtract from the cash balance, but seemingly it is me that is not used to the normal.

The regular dividend payment approach would increment the cash balance, followed by a regular Buy... that looks like it should work. Any downsides? Are there any foreseeable problems later down the line when I may wish to create reports, or file tax returns? I hope you understand.

Thanks,

Because of the way the registrar is handling the DRIP - only buying whole shares and carrying over "excess" cash to be included with the next dividend and purchase - you absolutely need to record 2 events for each dividend: a "Div" action for the payment of the actual dividend amount and then a "Buy" action for the actual purchase of shares.  That will keep you perfectly in synch with the registrar and provide the absolute correct reporting.

The ReinvDiv action just won't work in your case since the explicit assumption behind this action is that the entire dividend is used to purchase stock - including fractional shares - and that's just not the case here.

q_lurker

Andy said:

Thank you for the responses. You are correct q.lurker, I receive the dividend as 'cash', for example $45, then stock is purchased at $20/share minus commission. The remaining amount is then held and added on to the next dividend payment months later. This is primarily why I find it useful to track the cash balance as well.

NotACPA, It is odd to me that ReInvDiv does not subtract from the cash balance, but seemingly it is me that is not used to the normal.

The regular dividend payment approach would increment the cash balance, followed by a regular Buy... that looks like it should work. Any downsides? Are there any foreseeable problems later down the line when I may wish to create reports, or file tax returns? I hope you understand.

Thanks,

Personally, I do not find anything 'technically correct' about Amount Reinvested in any application.  I believe the investor (regardless of whether they are a Quicken user of not) should recognize that each time that dividend gets used to buy shares, the investor is making an investment decision.  In that sense, the reinvested dollars are no different than the original dollars used to buy shares or subsequent similar investments of 'outside' dollars.  Further, I try to keep in mind that there are also tax liabilities associated with the dividends and when using reinvestment plans, the investor will be paying those tax liabilities from other sources.  That is not a knock on the plans; it is a needed awareness of the bigger picture.  

As far as the broker / registrar differentiation, that strikes me as a red herring.  The Quicken "Amount Reinvested" and ReinvDiv transaction can be used in either case without legal or financial implications, IMO.

NotACPA

Andy said:

Thank you for the responses. You are correct q.lurker, I receive the dividend as 'cash', for example $45, then stock is purchased at $20/share minus commission. The remaining amount is then held and added on to the next dividend payment months later. This is primarily why I find it useful to track the cash balance as well.

NotACPA, It is odd to me that ReInvDiv does not subtract from the cash balance, but seemingly it is me that is not used to the normal.

The regular dividend payment approach would increment the cash balance, followed by a regular Buy... that looks like it should work. Any downsides? Are there any foreseeable problems later down the line when I may wish to create reports, or file tax returns? I hope you understand.

Thanks,

BUT, ReinvDiv can not be used in the OP's situation for reasons that Tom Young pointed out.

And broker/registrar makes a difference as to whether the transactions can be downloaded as few registrars provide such a service while MANY brokerages do.